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What
is total and permanent disability?
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Approximately
1.7 million Australians aged under
65 years of age are living with a
physical disability.
Australia’s Health 2004 – Australian
Institute of Health and Welfare,
2003
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Total and permanent disability
insurance (or TPD insurance)
provides a lump sum benefit if the
insured becomes totally and
permanently disabled as defined by
the policy. The definition may
require that the insured is unable
to work in their own occupation, or
that the insured is unable to work
in any occupation (the insured will
normally select a total and
permanent disability definition when
applying for the policy).
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Why
buy TPD insurance?
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The lump sum payout provided by a
TPD insurance policy will assist
with funding ongoing medical costs
related to a disability, and fund
ongoing repayments on home loans and
ongoing living expenses. Where
necessary, it might also be used to
pay for necessary home modifications
and/or to arrange home assistance
like nursing or cleaning.
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How much cover is required?
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When considering TPD
insurance it is prudent to
ask whether you and your
family would have sufficient
savings to pay ongoing
expenses and the additional
expenses that may arise if
faced with a permanent
disability.
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This includes continuing to
meet financial commitments
such as mortgage payments
and ongoing living costs, as
well as paying for the
unavoidable expenses related
to the disability. Total and
permanent disability cover
can be arranged as a
standalone insurance policy,
or as an extension to a term
life policy.
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Some superannuation funds
may also offer TPD
insurance.
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- If
unsure about the right amount of
cover, advice from a professional is
recommended. It is also recommended
that the lump sum insured be
reviewed regularly, especially with
changing circumstances that may
effect whether the TPD insurance sum
insured continues to be sufficient.
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Features and options
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When applying for TPD insurance, the
insured will generally need to
choose between an “own occupation”
or “any occupation” definition. Full
details will be available in the
product disclosure statement – own
occupation requires that the insured
is unable to work ever again in
their own or normal occupation,
whereas any occupation requires that
the insured is unable to work ever
again in any occupation for which
they are reasonably suited by
education, training or experience.
Depending on the policy, specialised
definitions for professionals and
homemakers may be available.
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Taxation of TPD insurance
When held outside of super, total
and permanent disability insurance
premiums paid are generally not tax
deductible, however the lump sum
benefit paid when making a TPD
insurance claim is generally paid
tax free.
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